Risks on complex projects: A case study by Joy Gumz

Risks on complex projects: A case study by Joy Gumz

Speaker: Joy Gumz

Senior Director, CPA, CISA, PMP
Project Auditors LLC - Rancho Santa Margarita, CA

Wednesday, 9 May - 9.00–10.15 - 1 hour, 15 minutes

Summary: Imagine you are the programme risk engineer for a new refinery. The project will be entering the procurement phase with key decisions required. What would you do? This case study walks participants through the story, pausing at crucial decision points to ask participants how they would respond to the situation. Learning objectives

Risks on complex projects: A case study by Joy Gumz Report by: 
Valérie Laforest, PMP
France Sud Chapter

 
Risks on complex projects: A case study by Joy Gumz

Report:

The objective of the session:

  • Understand the importance of risk management during initiation, planning and procurement phases of a project.
  • Better identify risks both positive and negative.
  • Define contractual clauses that may reduce and mitigate risks.

In this very well attended session where the set-up was by tables of 8 people, Joy Gumz asked the audience to consider themselves as the project risk ingeneer. She provided us with some information about the project before putting to work by groups: 

The objective is to build a refinery. It is expected to take 4 or 5 year but the sponsor would like the costs established in the first plan to be reduced by an average of 10%. Re-tender is considered but it would use 8 to 12 months of the plan. The number of work packages and consequently of contractors is 15 and there are 2 sets of 2 work packages which are the result of a split as they are numbers 1 and 2. She also gave information about the join venture between the French and Saudi companies who are undertaking the project, and the stakeholders situation of the project.
At last, market and economic conditions were mentioned as such projects are extremely complex and that could lead to growing reliance on contractors. 

After this first set of information, every table was given 20 minutes to discuss and to come out with options to address the following issues and any other ideas to reduce risk at this time:

 

  • Re-tender or not
  • Number of work packages
  • Clause that should be included in the contractor's contrat

During the debrief after the discussion within groups, some very interesting points came out. It appeared that the issues of re-tender and re-work of the work packages are closely linked. As the work packages are very likely too many and an additional year to complete the project is possible, it was commonly admitted that re-tender would a valid option. Moreover, the audienced pointed out that integration always carry many risks in complex projects, and checking that contractors are able to work with each other should be considered.

Regarding the list of work packages, several options were considered such as re-build the packages by skills, collapse the packages that had been splitted. 
In complex projects, when it is not possible to get a prime contractor, the PM should consider building a phantom one and add the integration as an additional work package.

To address integration risks, it would be valuable to set an integrated plan of the whole project and have all the PM team and the contractors agree on it. Awards and penalties should be added to the contract clauses to ensure that integration is taken care of by the contractors. Including a representant of each contractor in the project team could also address this issue.

In conclusion, this hands on session demonstrated again that risk analysis is key. Good risk management practices will increase the chances of the projects to succeed. An affective case study captures a tension between courses of action, fosters decision-making thinking (NASA 2008) and allows for in-depth analysis. However, it will probably generate more questions than answers and won't provide a solution to every problem.

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